The one big doubt about the Memorex International NV bid for Telex Corp (CI No 827) is whether the Dutchregistered, London-based company can raise the necessary cash for its $56 a share offer, loaded as it is with the costs of its management buyout from Unisys Corp. Unisys now bears the big research and development costs of staying in the top-end disk drive game, and Memorex by all accounts is doing very well as a freestanding marketing company with a little manufacturing on the side – but it is not the best time to be trying to raise cash by issuing a slew of junk paper. Memorex is believed to be running at over UKP1,000m this year, and looks for operating profits of UKP100m plus, which means that taking in the Tulsa, Oklahoma 3270 terminals and tape drive maker would create a combination with sales of nigh on $2,000m, making the company the giant of the IBM plugcompatible industry. Some rationalisation would be required, likely reducing annual business a bit, but consolidation in the now highly competitive 3270 screens market is very desirable – and Telex Corp brings in that lovely long-term business with the big airlines. The combination would bring together two old-time partners: when Telex became too poor in the mid-1970s to run its own European subsidiary, the pre-Burroughs Memorex used to market its products in Europe. The Memorex bid has an indicated value of $911.4m against $808.5m for the offer from Asher Edelman – and the market certainly seems to believe Memorex can do it – Telex Corp shares jumped $9.75 to $51.50 on the news of the Memorex counter-offer.
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